Audit of EOU/STP/EHTP unit under Customs control- DGEP clarifies (See 'DDT')

RBI further cuts repo rate by 100 basis points; interest rate to go down;

Govt to introduce Limited Liability Partnership Bill, 2008 in Rajya Sabha today;

Does 'customised software' satisfy Rules as 'goods'? Look for HC decision in Infosys Tech case tomorrow ;

EC announces 7-phase assembly poll schedule for Jammu & Kashmir, beginning Nov 17 and ending on Dec 24

Strike by RBI employees on Tuesday: RBI advises public to wrap up transactions on Monday as it fears disruption of banking activities;

Countdown for India's first unmanned moon mission to begin from Monday;

Nissan signs MoU with Ennore Port for export of vehicles ;

ddt 20 oct.pdf + auditeou.pdf

Board Circulars vs Supreme Court Orders;

tiol analysis.pdf

Consistency and discipline are of far greater importance than winning or losing of court proceedings;

guest column.pdf

Tax withholding and payments for use of server and internet;

2008-TIOL-09-CIC.pdf + cic story.pdf

Customs directed to 'disclose all' to RTI applicants;

mbuzz1081.pdf

Textile exports fell short of target by USD 3 bn last fiscal;

mbuzz1080.pdf

UNWTO Executive Council agrees to India's proposal of not allowing grading of tourism destinations;

mbuzz1079.pdf

CERC asks state utilities to ensure grid discipline;

mbuzz1078.pdf

India to invest Rs 20 lakh Crore in infrastructure during 11th Plan: Baalu;

mbuzz1077.pdf

India, Germany to jointly commemorate 50 years of bilateral cooperation;

2008-TIOL-194-SC-CX-CB.pdf + sc story.pdf

CCE, Bolpur Vs M/s Ratan Melting & Wire Industries (Dated: October 14, 2008)

Binding nature of Board Circulars: Board Circular not to prevail over Supreme Court Order - It is for the Court to declare what the particular provision of statute says and not for the Executive - A circular which is contrary to the statutory provisions has really no existence in law: If the submissions of learned counsel for the assessee are accepted, it would mean that there is no scope for filing an appeal. In that case, there is no question of a decision of this Court on the point being rendered. Obviously, the assessee will not file an appeal questioning the view expressed vis -a- vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution: SUPREME COURT;

2008-TIOL-502-ITAT-DEL.pdf + PE story.pdf

Fugro Engineers B V Vs ACIT, Dehradun ( Dated : August 29, 2008 )

Income tax - assessee is a non-resident company - carries out geo-technical investigation at drilling locations of its clients - Scrutiny by revenue - AO holds income earned from all the clients are taxable u/s 44BB - CIT(A) holds even moving vessels can constitute a PE if the vessel is mobilised and brought into the territorial waters of a jurisdiction to carry out business in that jurisdiction

Held, All the receipts of the assessee are to be taken into account for working out the presumptive income u/s 44BB: it is clear that no length of time is prescribed in respect of paragraph 1. In such a situation if the place of business is available to the assessee for the period in which its independent work can be completed, it shall constitute a PE and it is accordingly held.

If the place of business is available to the assessee for the period in which its independent work can be completed, it shall constitute a PE: it is clear from the perusal of section 44BB that all amounts either paid or payable (whether in India or outside India) or received or deemed to be received (whether in India or outside India) are mutually inclusive, and includible in the receipts mentioned in sub-section (2) of section if 44BB. Thus, there is a clear authority of the jurisdictional High Court that all amounts mentioned in sub-section (2) are to be included for the purpose of calculating deemed income on the basis of receipts. There is no doubt that the assessee has received the amount and, thus, the same is includible in the receipts for working out the presumptive income :DELHI ITAT;

2008-TIOL-501-ITAT-BANG.pdf

M/s State Bank Of Mysore Vs ACIT, Bangalore ( Dated : August 29, 2008 )

Income tax – Deduction claimed u/s 36 (1) (viia) based on population of places in which appellant rural banks are situated – when census data for 2001 is available in public domain before the first day of previous years the same has to be considered for the A.Y. 2003-04 & 2004-05 - No infirmity is the CIT (A)/AO orders – Assessee's appeals dismissed.: BANGALORE ITAT;

2008-TIOL-500-ITAT-DEL.pdf

Shar-Lee Filtorites Private Ltd Vs ACIT, New Delhi ( Dated : March 28, 2008 )

Income Tax - Sec 40A(2)(b) – Payments to related parties - Assessee company doubling director's remuneration – Increased Remuneration claimed as expense – The hike in remuneration disallowed by Assessing Officer holding the same to be excessive and unreasonable under section 40A(2)(b) - CIT(Appeals) upheld AO's order stating there is negligible business activity in relevant year and assessee is passing through lull phase of business – No justification for doubling director's remuneration – Assessee's contention before ITAT that increased remuneration allowed by revenue in full in subsequent assessment year in  regular assessment and CBDT Circular No. 6-P of 1968 dated 7 July 1968 and CBDT Circular No. 636 dated 31 Aug 1992 supporting assessee's stand that unless tax avoidance is proved by AO, section 40A(2)(b) cannot be pressed and same to be used sparingly - In present case, since directors offered increased remuneration in their hands at maximum marginal rate of 30% - No tax avoidance by Assessee – ITAT held that since reasonableness of an expenditure is be judged from businessman's angle and since section 40A(2)(b) cannot be pressed unless tax avoidance is proved on part of assessee -  Fully Applicable to Facts of present case- As assessee was substantially running its business on shoulders of directors to whom increased remuneration was paid and in subsequent years, revenue itself allowed subject increased remuneration treating the same as reasonable – Addition deleted


Income Tax Act – Section 37(1) – Foreign Travel Expenses of Directors – AO disallows stating that since no manufacturing activity carried in current year, subject expenses not related to earning of income in current year – CIT (Appeals) upheld AO's order stating subject expenses pertained to exploration of new business – Assessee's contention before ITAT that immediate benefit not a condition precedent for allowing travel expenses vide CBDT Circular No. 4 of 1950 and subject expenses incurred for running present business smoothly and efficiently- Tribunal holds that neither genuineness of expense is doubted nor its business purpose is doubted – Admittedly expenses are not for personal purposes – CIT-A's observation that expenses for new business is de hors the material available on record evident from  detailed note furnished by assessee categorically stating foreign trips to Florida in USA were made to explore new business opportunities in refrigeration equipments which is core business line of Assessee and in same set of facts in subsequent years higher travel expenses allowed in full by revenue in regular assessment – Addition Deleted :DELHI ITAT;

M/s Mittal Tower Premises Co Op Society Ltd Vs ITO, Mumbai ( Dated : August 08, 2008 )

Income tax - assessee is a housing society - collects non-occupancy charges from Members not occupying the flats for themselves and have let out against rents - also collects higher charges than the charges stipulated for Members occupying the flats themseleves - AO for taxing the extra sum collected from non-occupants - CIT(A) attributes the extra charges to profit motive - Held, since the assessee is a premises society of commercial flats and not cooperative society where the State Govt has put a limit on collection of service charges, such maintenance charges are governed by the principle of mutuality and is not taxable

However, the transfer fee collected from transferee when a deal is struck between a transferore and a transferee, is exigible to tax as transferee who is not a Member of the society is not governed by the principle of mutuality : MUMBAI ITAT;

2008-TIOL-498-ITAT-MUM.pdf

Shri Jayram Rajgopal Poduval Vs ACIT, Mumbai ( Dated : January 18, 2008 )

Income Tax - Assessee claims exemption of interest u/s 10(15)(iv)(fa)on fixed deposit on the ground of resident status as RNOR and produced a chart showing his stay in India in the preceding years - AO says the chart reveals that the assessee was not "non-resident" in 9 out of 10 years and had also resided in India for more than 730 days in the preceding 7 years and granted the status of ROR - exemption denied - CIT(A) affirms the finding of the AO - Held, in the light of settled laws it becomes clear  that the opinion of the first appellate authority for fulfilling both the conditions of Section 6(6) simultaneously is no longer correct. When one of these two conditions as laid down in Section 6(6)(a) is fulfilled, the status of resident gets converted into RNOR. Section 6(6) has been substituted by the Finance Act, 2003 w.e.f. 01.04.2004 but will have prospective operation. The claim of assessee is as per law and interest u/s 234B would also be brought to naught. Assessee's appeal allowed . : MUMBAI ITAT;

2008-TIOL-497-ITAT-VIZAG.pdf + vizag story.pdf

M/s Coastal Corporation Ltd Vs JCIT, Vizag (Dated: May 30, 2008)

Income Tax – Re-opening of assessment - The note given in the Annual Report cannot be taken as full and true disclosure. The Assessing Officer did not make enquiries regarding taxability of principal portion waived. The assessee has also failed to bring the above facts to the notice of the Assessing Officer though the same has been mentioned in the Annual report. The note given in the Annual Report cannot be taken as full and true disclosure. Hence the belief of the assessing officer regarding escapement of income can be taken as reasonable one. The assessee has also not established that there existed no belief or the belief was not at all bona fide one.

Whether the waiver of principal part of the loan would give rise to income taxable under Section 41(1) of the Income Tax Act. Section 41(1) consists of two main ingredients "viz., (a) "loss or expenditure" and (b) "trading liability". The two components of section 41(1) of the Act have to be read separately, namely ( i ) has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such loss or expenditure; (ii) some benefit in respect of such trading liability by way of remission or cessation thereof. The words "remission or cessation thereof" shall apply only to trading liability and it shall not apply to any loss or expenditure.

Whether waiver of principal amount of loan would amount to trading liability? On this issue, the Delhi High Court in Phool Chand Jiwan Ram has held that only trading debts, which are allowed as deduction in earlier years, can be treated as trading liability. It is not in dispute the principal portion of loan amount, which has been waived, has not been claimed as deduction in any of the years. Hence waiver of principal portion of loan cannot be termed as waiver of trading liability and hence the second clause of Section 41(1), relating to trading liability, shall not apply to the present case under consideration.

Whether the waiver of loan will amount to a benefit relatable to depreciation expenditure claimed earlier? In this case, the assessee had obtained a loan of Rs.3.18 crores from SCICI and acquired four trawlers by utilizing the above said loan. It had also claimed depreciation from 1988-89 to 1997-98 to the extent of Rs.3.62 crores on the trawlers so acquired by availing the loan. The waiver of principal amount is Rs.2.24 crores . Hence the department contends that such waiver would give rise to the refund of benefit of depreciation claim allowed earlier. It is to be noted here that the depreciation under Section 32 of the Act is allowed on the "actual cost" of the assets. The term 'actual cost' has been defined in Section 43(1) of the Act, according to which, "actual cost' means the actual cost of the assets to the assessee reduced by that portion of the cost thereof, if any, as has been met directly or indirectly by any other person or authority.' So, the only deduction permissible from the actual cost is the amount, which has been met by any other person or authority. The words "which has been met by another person or authority" would mean the non-refundable amount given by any other person or authority for the purpose of meeting the cost of the asset. When a person avails a term loan, it has to be repaid along with the interest, if any, in accordance with the terms and conditions prescribed for that purpose. If the term loan is utilized for acquiring any asset, it cannot be termed as 'meeting of a portion of cost of the asset'. Loan is availed as a source of finance while the depreciation is allowed on the actual user of the asset. So 'availing of loan' and 'claim of depreciation' are two distinct things, which cannot be clubbed together. : VIZAG ITAT;

CENTRAL EXCISE SECTION

CIRCULAR

excircular876.pdf

CBEC allows 1% variation in weight for cement bags for levy of excise duty.;

CASE LAWS

2008-TIOL-194-SC-CX-CB.pdf + sc story.pdf

CCE, Bolpur Vs M/s Ratan Melting & Wire Industries (Dated: October 14, 2008)

Binding nature of Board Circulars: Board Circular not to prevail over Supreme Court Order - It is for the Court to declare what the particular provision of statute says and not for the Executive - A circular which is contrary to the statutory provisions has really no existence in law: If the submissions of learned counsel for the assessee are accepted, it would mean that there is no scope for filing an appeal. In that case, there is no question of a decision of this Court on the point being rendered. Obviously, the assessee will not file an appeal questioning the view expressed vis -a- vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution.: SUPREME COURT;

2008-TIOL-1713-CESTAT-DEL.pdf + maruti story.pdf

M/s Maruti Suzuki India Limited Vs CCE, Delhi/Bhopal (Dated: August 12, 2008)

Central Excise – Valuation - advertisement expenditure incurred by a customer can be added to the sale price only if the manufacturer has an enforceable legal right against the customer to insist on such advertisement expenses : it appears that these advertisements cannot be held to have been carried out by the buyers on behalf of the manufacturer; that the assessee has no enforceable legal right to insist on incurring such advertisement expenditure. The contention of the Department that there is no option available to the dealers does not stand proved. The stand of the department that the failure on the part of the dealer may lead to the cancellation of dealership and therefore there is an enforceable legal right is acceptable. Such cancellation cannot enable recovery of dealer's share of cost of advertisements. : DELHI CESTAT;

2008-TIOL-1712-CESTAT-AHM.pdf

M/s Sahakari Khand Udyog Mandli Ltd Vs CCE, Daman (Dated: August 26, 2008)

Central Excise – Levy of education cess on sugar cess - Sugar cess is not a duty of excise, though collected by Department of Revenue, and as such is not to be taken into account while calculating the education cess – Tribunal decisions in Bombay Burmah Trading Corpn & TAFE, Chennai followed: AHMEDABAD CESTAT;

2008-TIOL-1711-CESTAT-MUM.pdf

M/s Yojit Enterprises Vs CCE, Mumbai-IV (Dated: August 12, 2008)

Central Excise – Notional profit of job worker added to the AV – CA Certificate produced by appellant to show that the job charges paid by the Principal includes their profit margin – CA Certificate cannot be given credence as it does not state that it was given after examination of the books of accounts of 1993-94 – No break up of job charges and profit margin in the Certificate :MUMBAI CESTAT;

2008-TIOL-1708-CESTAT-KOL.pdf

M/s Crystal Cable Industries Ltd Vs CCE, Haldia (Dated: July 15, 2008)

Central Excise – Stay/Dispensation of pre-deposit – MODVAT Credit availed on Xerox copy of the Bill of Entry – though nine years have passed since Show Cause Notice was issued, the appellant failed to produce proper evidence – no prima facie case for waiver of pre-deposit. :DELHI CESTAT;

SERVICE TAX SECTION

2008-TIOL-194-SC-CX-CB.pdf + sc story.pdf

CCE, Bolpur Vs M/s Ratan Melting & Wire Industries (Dated: October 14, 2008)

Binding nature of Board Circulars: Board Circular not to prevail over Supreme Court Order - It is for the Court to declare what the particular provision of statute says and not for the Executive - A circular which is contrary to the statutory provisions has really no existence in law: If the submissions of learned counsel for the assessee are accepted, it would mean that there is no scope for filing an appeal. In that case, there is no question of a decision of this Court on the point being rendered. Obviously, the assessee will not file an appeal questioning the view expressed vis -a- vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution.: SUPREME COURT;

2008-TIOL-1710-CESTAT-BANG.pdf

M/s KMS Coach Builders Vs CCE, Bangalore (Dated: June 23, 2008)

Service Tax – Amounts collected as representing Service tax – No requirement to pay service tax but tax paid and collected from the client – No evidence to show that the burden of unjust enrichment is discharged – In cases where amounts are collected as representing service tax such amounts ought to be deposited with the Government in terms of Sec. 11D: BANGALORE CESTAT;

2008-TIOL-1709-CESTAT-AHM.pdf

M/s Karnavati Alfa International Ltd Vs CST, Ahmedabad (Dated: September 1, 2008)

ST - Assessee is a commission agent - fails to pay service tax - On inquiry, the assessee claims non-receipt of payment - however, the documents reveal receipt of payment - financial difficulty pleaded - Pre-deposit ordered : AHMEDABAD CESTAT;

2008-TIOL-1706-CESTAT-DEL.pdf

CCE, Raipur Vs M/s Century Cement (Dated: September 17, 2008)

ST - Cenvat Credit - Assessee is a cement manufacturer - avails credit for tax paid on input services utilised for the residential colony - Revenue disallows but Commissioner(A) allows following Tribunal's decision in the case of Manikgarh Cement 2008 TIOL-133-CESTAT-MUM - In view of the Tribunal's decision in this case, applications rejected : DELHI CESTAT;

CUSTOMS SECTION

NOTIFICATION

dgft08cir036.pdf

Applications for claiming deemed export benefits: DGFT once again amends HBP;

CASE LAWS

2008-TIOL-194-SC-CX-CB.pdf + sc story.pdf

CCE, Bolpur Vs M/s Ratan Melting & Wire Industries (Dated: October 14, 2008)

Binding nature of Board Circulars: Board Circular not to prevail over Supreme Court Order - It is for the Court to declare what the particular provision of statute says and not for the Executive - A circular which is contrary to the statutory provisions has really no existence in law: If the submissions of learned counsel for the assessee are accepted, it would mean that there is no scope for filing an appeal. In that case, there is no question of a decision of this Court on the point being rendered. Obviously, the assessee will not file an appeal questioning the view expressed vis -a- vis the circular. It has to be the revenue authority who has to question that. To lay content with the circular would mean that the valuable right of challenge would be denied to him and there would be no scope for adjudication by the High Court or the Supreme Court. That would be against very concept of majesty of law declared by this Court and the binding effect in terms of Article 141 of the Constitution.: SUPREME COURT;

2008-TIOL-1714-CESTAT-MUM.pdf + ranbaxy story.pdf

M/s Ranbaxy Laboratories Ltd Vs CC, Nhava Sheva (Dated: June 5, 2008)

Customs – Claim of benefit of exemption Notification without challenging assessment order – Refund claims for excess duty paid not maintainable in the absence of such challenge of original assessment – SC decision in Priya Blue Industries [ 2004-TIOL-78-SC-CUS ] and Larger Bench decision in Eurotex Industries [ 2007-TIOL-1184-CESTAT-MUM-LB ] followed :MUMBAI CESTAT;

2008-TIOL-1707-CESTAT-DEL.pdf

M/s Goenka Impex Pvt Ltd Vs CC, Lucknow (Dated: June 9, 2008)

Customs – DEPB benefit – Goods exported different from the goods declared for DEPB benefit – Benefit to be extended by DGFT authorities – Imposition of redemption fine for goods which are liable for confiscation justified - Redemption fine imposed in remand order cannot be more than that of original proceedings – Fine reduced from Rs. 2 lakhs to Rs. 1 lakh : DELHI CESTAT;